Dow Clears All-Time High; S&P 500 ETF Within 2% of Record

SPDR S&P 500 ETF (NYSEArca: SPY) is just 2% away from joining SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) at new all-time highs, an event that is fueling both exuberance and caution among investors scarred by the 2008 credit meltdown.

The Dow ETF traded as high as $142.68 a share on Tuesday, eclipsing its record intraday high of $141.95 a share recorded in October 2007.

Meanwhile, the S&P 500 fund posted a session high of $154.70 a share on Tuesday, about 2% shy of its all-time high of $157.52 from Oct. 11, 2007.

It has taken these two major U.S. stock indices less than five and a half years to erase the steep losses from the financial crisis. The Dow and S&P 500 have both doubled in price since the 2009 low.

“Psychologically, it may give a sense that we have recovered a tremendous amount from the depths of the crisis,” Wasif Latif, vice president of equity investments at USAA Investments, told Bloomberg. “On the other hand, it could create a sense of nervousness that we reached an all-time high, so how much more is there to go?”

In terms of performance, the Dow ETF is outpacing the S&P 500 ETF so far in 2013 with an 8.4% total return versus 7.4%.

The two benchmarks have a high correlation despite some key methodology differences. For example, the Dow weights its stocks by share price rather than by market capitalization like the S&P 500 and most other indices. The Dow has 30 stocks while the S&P index holds 500 U.S. blue-chip companies. [Dow ETF Eyes All-Time High]

“It has been a long, grinding recovery, but the private economy is holding its own in the face of very challenging policy and political risks,” said Stephen Wood, chief market strategist at Russell Investments, in a Reuters report on the new Dow high. “There is a lot of momentum and rotation going into equities from cash and bonds, and right now sentiment seems to have the upper hand over fundamentals.”

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